With 350 mn shoppers, Indian e-retail to grow at 30% CAGR over five years: Study

The Indian online retail market is set to grow at a compounded annual growth rate (CAGR) of 30% over the next five years, according to estimates from Boston headquartered management consultancy Bain and online retail giant Flipkart.

The $850 billion retail market in the country -- the fourth largest in the world -- is at a critical inflection point, led by the growth of e-retail as well as the Covid-19 pandemic, which has consumers turning to online shopping for safety and convenience, the How India Shops Online report said. 

The potential for growth is massive, as the industry only has a penetration of 3.4%, the report said. It is on track to reach nearly 350 million shoppers over the next five years, which would propel the online gross merchandise value to $100-$120 billion for the same period, it added.

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Contrary to popular belief, customers in tier-2 and tier-3 cities make up nearly half of all online shoppers and account for three out of five orders for leading e-retail platforms, it said.

“E-retail is democratising the landscape as it has access to over 97% of India’s pin codes,” the report said. “It is on course to break go-to-market barriers for small sellers.”

In fact, e-retail platforms have turned into research platforms of sorts, the study said, as one in three product searches in the country start on a e-retail site. This also brings attention to the largely untapped vernacular content opportunity, it said.

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To make the most out of online retail, sellers must invest in high quality product images and easy-to-read and informative product descriptions, according to Bain. This need reflects in the study as well, which says that one in two visitors look through the image gallery, while one in 25 shoppers click to expand the detailed product description.

Additionally, the report also observed that Indian shoppers spend less than nine minutes on each visit to these websites. They look through more than 20 product pages before making a purchase -- this number increases to 50 when they’re shopping for mobile phones and ethnic wear, it added.